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Cite as: [2007] EWCA Civ 176

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Neutral Citation Number: [2007] EWCA Civ 176
Case No: A3/2006/1003

His Honour Judge Fysh QC (sitting as a Judge of the High Court)
HC 04 C035805

Royal Courts of Justice
Strand, London, WC2A 2LL
08 March 2007

B e f o r e :



Mastercigars Direct Limited
- and -

Hunters & Frankau Limited

and between:

Corporacion Habanos SA


(1) Mastercigars Direct Limited

(2) Christopher John du Mello Kenyon

Part 20 Claimant/

Part 20 Defendant/ Appellant
Part 20 Defendant


(Transcript of the Handed Down Judgment of
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Geoffrey Hobbs QC and Miss Denise McFarland (instructed by Messrs Crane & Staples)
for the Appellant Mastercigars Direct Limited
Mr Richard Arnold QC and Mr Mark Vanhegan (instructed by Messrs Mishcon de Reya) for the Respondent Corporacion Habanos
Hearing dates : 30-31 January and 1 February 2007



Crown Copyright ©

    Lord Justice Jacob:

  1. This is an appeal from a judgment of HHJ Fysh QC sitting as a Judge of the Chancery Division, [2006] EWHC 410 (Ch), [2006] RPC 805.
  2. The Background facts

  3. Prior to the appeal, the parties were asked to agree a statement of background facts. Subject to some minor and irrelevant differences, this they did. They said that it could be used as a working document. Much of it is taken from the Judge's findings. I set it out here as amended by Mr Hobbs QC for the appellants but with some shortening and amendment. I am grateful to him and Mr Richard Arnold QC for the respondents for their co-operation.
  4. The parties
    1. Corporacion Habanos SA ("HSA") is a Cuban joint venture company. 50% is owned by European interests and 50% owned by Empresa Cubana Del Tabaco ("Cubatabaco", a Cuban subsidiary of Tabacuba, the Cuban state tobacco company). HSA is the owner of the trade marks in suit. They are listed in fn. 26 of the judgment below and include many long-established world famous names, such as H. Upmann and Punch. HSA has been granted by the Cuban government the exclusive rights to buy, sell and market nationally and internationally rolled tobacco of Cuban origin in any form or type. HSA is and was at the material times run on a commercial basis. HSA occupies a central role in the Cuban tobacco industry: it reviews and fixes the price of hand made Cuban cigars ("habanos") both for export and local sale; it determines the brand positioning for habanos, advertising and general sales structure and all aspects of local marketing strategy; it determines all aspects of the packaging and trade mark use - and more.
    2. Hunters & Frankau Ltd ("H&F") was appointed by Tabacuba in 1990 as the sole and exclusive distributor for, inter alia, the UK to import, sell and distribute habanos. Upon the incorporation of HSA in September 1994, and the acquisition by HSA of the export and distribution rights from Cubatabaco, H&F entered into an exclusive distributorship agreement with HSA in September 1994. On 30 June 2002 HSA and H&F entered into a new 9.5 year exclusive distributorship agreement.
    3. Mastercigars Direct Ltd ("MDL") was incorporated by Mr Kenyon on 14 June 2001. Mr Kenyon is the beneficial owner of the company, and its sole director. The business of MDL is to import cigars, and in particular Cuban cigars, into the United Kingdom for resale here in competition with H&F. Part 20 proceedings for infringement have been stayed as against Mr Kenyon pending the outcome of the claim against MDL.
    Cigar production in Cuba
    4. The tobacco for Cuban cigars is grown on farms in Cuba, more than 70% of which are privately owned. The cigars are then manufactured in factories, most of which are owned by the Cuban Ministry of Agriculture and managed by Tabacuba. The habanos are made individually in the factories by experienced rollers. Their quality is assessed throughout all stages of their production.
    5. The habanos once packaged by the factories are then supplied to HSA's warehouse. HSA then performs further quality control checks on the cigars. HSA's warehouse is split into two main sections, one for cigars for export and the other for cigars to be sold domestically. There is no difference in the quality standards applied to cigars for sale in Cuba as opposed to those for sale abroad. However every box of habanos which is supplied by HSA for sale through outlets in Cuba has, since about April 2003, borne a holographic seal. These seals are applied to the cigar boxes in HSA's warehouse. If the hologram seal is removed from these boxes it leaves a noticeable mark. Habanos which are for sale abroad do not have the holographic seal applied to them.
    Sales of habanos by HSA
    6. HSA does not sell direct to consumers in Cuba or worldwide, rather it sells the habanos through a number of outlets in the following manner.
    7. Foreign sales channel. HSA has the relevant Cuban government authorisations and registrations to export habanos commercially. All commercial exports of cigars from Cuba for sale through foreign sales channels are made by HSA to its various overseas distributors, who are each granted, pursuant to a written distribution agreement, an exclusive territory in which they are authorised to use HSA's trade marks and the trade marks which HSA has been authorised to use. One such distributor is H&F.
    8. Domestic (Cuban) sales channel. Within Cuba, habanos are sold through outlets. There are approximately 230 such outlets in Cuba. None of these is owned or operated by HSA or a subsidiary of HSA. Since about 2005 HSA has delivered the habanos to each of these outlets directly. Prior to this date deliveries were made by intermediaries, although the outlet known as "La Casa del Habano" on the Quinta Avenida in Havana had been receiving deliveries directly from the HSA warehouse since about 2003.
    9. Every sale of habanos in Cuba must be recorded on a standard form invoice printed for security purposes, with a transverse water mark, HABANOS SA, visible under ultra violet light. HSA sends out blank books of standard form invoices. The invoices bear the title factura de venta de habanos (translation – Havana cigar sales invoice). The facturas are in triplicate. The facturas have spaces for the name, nationality and passport number of the purchaser to be filled in. Upon purchase of the habanos, the salesperson completes the factura, provides the customer with the original and one copy and the outlet keeps the second copy. The outlet does not send that copy or any copy of the factura to HSA although HSA is able, if it wishes, to obtain copies of facturas – the outlet would in practice comply with a request by HSA for these even though it has no strict legal entitlement.
    La Casa del Habano.
    10. There is a network of outlets in Cuba, and elsewhere in the world, which operate under the name "La Casa del Habano" (literal translation: Havana Cigar House). In Cuba there are approximately 32 such outlets. Outside Cuba these outlets are owned and operated by various entities, none of which are owned, in whole or in part, by HSA. The majority of the Casas del Habano in Cuba are owned and operated by a company called Caracol. Two Casas del Habano are owned and run by Sociedades Clubes y Restaurantes Continental SA ("Continental"), which is a company within the Cubalse group of companies (and hence is referred to by the Judge in the Judgment as "Cubalse").
    11. The operator of each such outlet has entered into a Franchise Agreement with HSA pursuant to which the operator is licensed to use the "La Casa del Habano" name which is owned by HSA. In addition the operators enter into a Rolled Tobacco Supply Agreement ("RTSA") pursuant to which HSA supplies the cigars to the relevant Casas.
    12. Each overseas Casa del Habano is required to purchase the habanos from the relevant exclusive distributor in the territory in which the Casa del Habano is located. In Cuba the outlets must purchase from HSA (as set out above).
    13. The Franchise Agreement does not grant the franchisee the right to apply any of HSA's cigar trade marks to habanos (or any cigars) or control in any manner the nature or quality of the habanos sold by them under those trade marks. Clause 11.2 of the Franchise Agreement provides that "Under no circumstances may the Franchisee re-sell the contractual products to another territory or re-sell these as a wholesaler". Clause 8.2 of the RTSA provides: "[The Franchisee] is not the broker, attorney, agent or representative of [HSA] for any purpose, and whenever [the Franchisee] refers to his relationship with [HSA] he will clearly state his capacity as CUSTOMER independent from SUPPLIER, with no authority or power to commit [HSA] or to enter into agreements on his behalf in any way for any purpose."
    13A. In the case of the RTSA with the outlet at Quinta Avenida operated by Continental: the PRODUCTS covered by the RTSA are identified as rolled cigars made in Cuba and flake: clause 1.1. The TERRITORY covered by the RTSA is identified as specified outlets: clause 1.3. HSA has the right to inspect the outlet at any time to ensure compliance with the obligations set out therein: clause 2.4. Continental undertakes not to manufacture, distribute or favour products competing with the PRODUCTS unless otherwise agreed in writing by the parties: clause 3.6. It is required to report to HSA, when HSA so requests, on sales, market development and any events and situations conducive to enhancing sale of the PRODUCTS: clause 3.10. It is required to pay HSA in US dollars 30 days after delivery of the PRODUCTS for the full price of the PRODUCTS that have been invoiced and delivered by HABANOS plus 2% for distribution: clause 6.2. Continental is authorised to use the TRADEMARKS on or in connection with the PRODUCTS under the terms of the agreement: clause 9.1. Continental is prohibited from removing, altering or hiding the TRADEMARKS, selling the PRODUCTS under any other brand or trademark other than the TRADEMARKS or using the TRADEMARKS on or in connection with products other than the PRODUCTS: clauses 9.2-9.4.
    Sales of habanos in Cuba to foreigners
    14. There are a number of legal restrictions imposed on a foreigner who wishes to take habanos out of Cuba. Resolution 41/2003 (which was made pursuant to Law Decree 162 on Customs) provides:
    (1) if cigars are carried loose (i.e. not in their sealed packaging), the traveller may carry up to 23 through Customs without having to present a factura;
    (2) if the traveller wishes to take out more than 23 cigars:
    (a) the cigars have to be in their original closed packaging showing the domestic hologram sticker; and
    (b) the traveller must provide Customs with evidence that the purchase was legal by presenting the factura.
    15. In addition there is an "informal" arrangement between HSA and the outlets in Cuba whereby HSA imposes a restriction on the maximum value of a purchase which any one individual can make on the occasion of any one visit to any given retail outlet. In relation to the Casas del Habano this limit is 25,000 CCU or roughly $25,000; but at the other outlets in Cuba (over 200), the limit is $2,000.
    The relationship between HSA and Continental a.k.a Cubalse
    16. Both HSA and Continental were at the material times separate companies operating in accordance with the laws and regulations of the Cuban state.

    The dispute

  5. The dispute is about 10 consignments of habanos. Before the Judge the first 9 were described as "the historic consignments" and the last "the Consignment." The proceedings began about the latter, which was seized by HM Customs and Excise at Gatwick. The seizure was at the instigation of H&F who alleged that the Consignment was counterfeit. It was Mastercigars who started proceedings, claiming a declaration as against H&F that there was no trade mark infringement and release of the Consignment. The response to this was not only a defence alleging the goods were counterfeit but also joinder of HSA as a Part 20 claimant. The upshot is that the case ended up as one in which HSA were alleging infringement of their trade marks.
  6. The allegation of infringement was on two bases – first that the Consignment was counterfeit and second, even if not, that both it and the historic consignments (which were not alleged to be counterfeit) were unlawful parallel imports. The "major part" (Judgment [133]) of the trial was taken up with the counterfeit allegation. The Judge dismissed it, saying "it is riddled with mysteries, lacunae and above all procedural unfairness" [147]. There is no appeal from this part of his Judgment. Mr Hobbs said that the Judge had:
  7. devoted a great deal of meticulous attention to the counterfeiting case. It was immaculate in the sense that he went to every detail. No stone was left unturned.

    By contrast, submitted Mr Hobbs, the judge had dealt with the parallel imports case without properly considering the facts.

  8. There was another point below, peculiar to the Consignment. As I have said this was seized by HMCE. It was contended that this seizure took place before the goods had been "imported" within the meaning of Art.5.3(c) of the Trade Marks Directive 89/104. On that basis MDL claimed there had been no infringement and that it was free to take the cigars somewhere outside the EEA. At a directions hearing a few days before the appeal was opened, I queried whether this point was of real interest to either side. It could only apply to the Consignment, which consisted of only about 3,300 cigars. Apparently (and I was told this may be the subject of complaint against HMCE) they have deteriorated in storage. The value at stake was clearly not worth a day's argument in the Court of Appeal. And in any event it was clear that MDL threatened and intended to import and sell the cigars. So, if there was no other defence, the court would have power to award a quia timet injunction.
  9. Accordingly upon Mr Hobbs conceding that last point, and Mr Arnold conceding that no financial relief or delivery up would be sought, the parties agreed not to argue the importation point. It could only affect costs and only a minor proportion of these. Quite what should be done about these was left over for discussion, if necessary, following our main judgment. The parties have agreed that any debate about those costs will not involve any question of whether their respective positions were correct in point of law.
  10. The Law

  11. On that basis all 10 consignments involve essentially the same question – did HSA consent to their being put on the market within the EEA (European Economic Area) within the meaning of Art. 5.1 of the Directive? This involves first a consideration of the law.
  12. I suppose nearly all members of the public would think that you cannot infringe a trade mark if you are just selling the genuine goods of the proprietor to which he has applied his trade mark. Many (probably most) trade mark lawyers think that ought to be the rule. After all, trade marks are the badge of the owner, a sign by which the consumer can know: "Here are the goods or services of a particular owner. I can rely on that sign." In the language of the Directive the function of a trade mark is to "guarantee the trade mark as an indication of origin".
  13. So the public would be surprised to know (and perhaps somewhat resentful of the fact) that the law of the EEA is such that if genuine goods are available outside Europe much cheaper than they are here, traders cannot buy them and import them for sale here, unless the trade mark owner has consented. Even though the trade mark tells the truth, its use can be prevented without that consent.
  14. The policy behind this rule has been called "fortress Europe." It has very substantial implications since nearly all goods (save perhaps some raw materials) bear trade marks. It means traders can use trade marks to partition Europe from the rest of the World Market. This can sometimes have beneficial effects (e.g. trade marks are perhaps the easiest of intellectual property rights to invoke to stop re-importation into Europe of pharmaceuticals sold cheaply in third world countries for local use). But generally the rule is self-evidently rather anti-competitive and protectionist. Our task is not to consider whether the rule is good or bad from an economic perspective. It is to apply it.
  15. First I must consider the rule in more detail. The basic provision is Art. 5.1 of the Directive as implemented into national law. It provides, so far is as material:
  16. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using the in the course of trade [any sign] …
  17. Art. 7 then goes on to provide that:
  18. The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor with his consent

    This is the so-called doctrine of EEA-wide exhaustion of rights. It was strictly unnecessary to include it in the Directive, given that the rule had already been well established in Community law for all intellectual property rights years before the Directive. This was done in cases such as Deutsche-Grammophon v Metro [1971] ECR 487 (copyright) Centrafarm v Winthrop [1974] ECR [1974] ECR 1183 (patents) and Centrafarm v Sterling Drug [1974] ECR 1147 (trade marks).

  19. Actually it was not even necessary to resort to a notion of "exhaustion of right" since what really mattered was the requirement of free movement of goods within the Common Market. That the doctrine was unnecessary to ensure this is particularly clear from Merck v Stephar [1981] ECR 2063 where the patentee had no IP right in the EU member state where he first marketed the goods and so had no right to "exhaust". But the doctrine is now so firmly embedded in EU law as one of "exhaustion" that it must be taken as settled. It has a life of its own and, particularly in trade mark law has gone so far as to influence the way courts have thought about the nature of the right itself. By jumping to consider whether or not there is exhaustion, the very function and nature of a trade mark has been overlooked. But such is the position which has now been reached. The doctrine clearly applies to trade marks as much as it does to the other IP rights, even though the nature of those rights is very different from trade marks and is particularly so much more obviously territorial in nature.
  20. As regards goods placed on the market outside the EEA by the trade mark owner or with his consent and then imported into the EEA the question therefore became just "exhaustion" or not, with no prior consideration of the basic nature of a trade mark. It was just treated as a territorial intellectual property right which could be "exhausted" like any other. This happened in a series of cases culminating with Zino Davidoff v A & G Import [2001] ECR I-8691.
  21. For present purposes it is sufficient to refer to the key passages in Davidoff:
  22. [33] The effect of the Directive is therefore to limit exhaustion of the rights conferred on the proprietor of a trade mark to cases where goods have been put on the market in the EEA and to allow the proprietor to market his products outside that area without exhausting his rights within the EEA. By making it clear that the placing of goods on the market outside of the EEA does not exhaust the proprietor's right to oppose the importation of those goods without his consent, the Community legislature has allowed the proprietor of the trade mark to control the initial marketing in the EEA of goods bearing the mark (Case C-173/98 Sebago Inc v. GB-Unic SA [1999] ECR I-4103, [21])
    [41] It therefore appears that consent, which is tantamount to the proprietor's renunciation of his exclusive right under Article 5 of the Directive to prevent all third parties from importing goods bearing his trade mark, constitutes the decisive factor in the extinction of that right.
    [42] If the concept of consent were a matter for the national laws of the Member States, the consequence for trade mark proprietors could be that protection would vary according to the legal system concerned. The objective of the same protection under the legal systems of all the Member States set out in the ninth recital in the preamble to Directive 89/104, where it is described as fundamental, would not be attained.
    [43] It therefore falls to the Court to supply a uniform interpretation of the concept of consent to the placing of goods on the market within the EEA as referred to in Article 7(1) of the Directive.
    [45] In view of its serious effect in extinguishing the exclusive rights of the proprietors of the trade marks in issue in the main proceedings (rights which enable them to control the initial marketing in the EEA) consent must be so expressed that an intention to renounce those rights is unequivocally demonstrated.
    [46] Such intention will normally be gathered from an express statement of consent. Nevertheless it is conceivable that consent may in some cases be inferred from facts and circumstances prior to simultaneous with or subsequent to the placing of the goods on the market outside the EEA which in the view of the national court, unequivocally demonstrate that the proprietor has renounced its rights….
    [53] It follows from the answer to the first question referred in the three cases C-414/99-416/99 that consent must be expressed positively and that the factors taken into consideration in finding implied consent must unequivocally demonstrate that the trade mark proprietor has renounced any intention to enforce his exclusive rights.
    [54] It follows that it is for the trader alleging consent to prove it and not for the trade mark proprietor to demonstrate its absence.
    [55] Consequently, implied consent to the marketing within the EEA of goods put on the market outside that area cannot be inferred from the mere silence of the trademark proprietor.
    [56] Likewise, implied consent cannot be inferred from the fact that the trademark proprietor has not communicated his opposition to marketing within the EEA or from the fact that the goods do not carry any warning that it is prohibited to place them on the market within the EEA.
    [57] Finally, such consent cannot be inferred from the fact that the trademark proprietor transferred ownership of the goods bearing the mark without imposing contractual reservations or from the fact that, according to the law governing the contract, the property right transferred includes, in the absence of such reservations, an unlimited right of resale or, at the very least, a right to market the goods subsequently within the EEA.
    [58] A rule of national law which proceeded upon the mere silence of the trade mark proprietor would not recognise implied consent but rather deemed consent. This would not meet the need for consent positively expressed required by Community law.
  23. From this Mr Arnold derived a number of propositions. I set them out shorn of an encrustation of case references and with some extra numbering:
  24. i) Articles 5 to 7 of the Directive must be construed as embodying a complete harmonisation of the rules relating to the rights conferred by a trade mark and accordingly define the rights of proprietors of trade marks in the Community/EEA;

    ii) national rules providing for exhaustion of trade mark rights in respect of goods put on the market outside the EEA by the proprietor or with his consent are contrary to Article 7(1) of the Directive as amended by the EEA Agreement;

    iii) for there to be consent within the meaning of Article 7(1) such consent must relate to each individual item of the product in respect of which exhaustion of rights is pleaded;

    iv) the trade mark proprietor's consent to the marketing of goods within the EEA may be implied where it is to be inferred from facts and circumstances which unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the EEA.

    v) Implied consent cannot be inferred from:

    a) the fact that the proprietor has not communicated his opposition to marketing within the EEA to all subsequent purchasers of goods placed on the market outside the EEA; or
    b) from the fact that the goods carry no warning of a prohibition on their being placed on the market within the EEA;
    c) or from the fact that the proprietor has transferred the ownership of the goods without imposing a contractual reservation and that, according to the law governing the contract, the rights transferred includes, in the absence of such a reservation, an unlimited right of resale or at least a right to market the goods within the EEA.
  25. I accept all those propositions – which indeed were not challenged by Mr Hobbs. I also accept that the onus lies on the defendant to prove consent express or implied. But I do not go as far as Mr Arnold seemed to suggest, that the onus lay on the defendant to prove implied consent to what English law calls the criminal standard of proof, namely beyond a reasonable doubt.
  26. He sought to get that from the Court's use of the word "unequivocal" or "unequivocally" in [45], [46], [47], [53] and its answer to the first question and from Roche Products v Kent Pharmaceuticals [2006] EWCA Civ 1775.
  27. I do not think the court's repeated use of the word "unequivocal" is about standard of proof at all. What the court was concerned with is acts of the proprietor which do not show that he must have consented to marketing in the EEA. It was not concerned with a standard of proof of those acts. It was saying that a proved act which is merely consistent with such consent, but also consistent with its absence is not enough. All the examples considered in Davidoff are of that type.
  28. So also was what was relied upon in Roche Products. Products (diagnostic test strips) sold by Roche only for trials in the Dominican Republic found their way here into the hands of the innocent defendants. The products were packed with instructions in English, Spanish and Portuguese (consistent with a destination of the Caribbean and Central and South America) and a CE mark indicating it complied with regulatory requirements for sale in Europe. But it did not follow from the fact that the packing indicated the product complied with such an important standard that permission for sale in Europe had been given.
  29. Neuberger LJ, having referred to the fact that "consent" is an autonomous concept of EU law referred to:
  30. [29] … the heavy onus on a person alleging that consent has been given under Art. 7 in circumstances where the trademark proprietor has not used words which ordinarily signify consent."

    He was not there laying down any general rule about onus of proof. Rather he was considering a specific onus on establishing that particular words which on their face do not signify consent do, as a matter of custom, have a special meaning of doing so (see [26]-[28]).

  31. Mr Arnold also pointed out that since Davidoff, in addition to Roche, there have been a string of cases in our courts where defendants have failed to establish implied consent, Quiksilver v Charles Robertson [2004] EWHC 2010 (Ch), [2005] FSR 8 at [11]-[15], Sony Entertainment v Nuplayer [2005] EWHC 1522 (Ch), [2006] FSR 9 at [79]-[80], Hewlett-Packard v Expansys [2005] EWHC 1495 at [8]-[12], Sony Computer Entertainment v Electricbirdland [2005] EWHC 2296 (Ch) at [6]-[9], Sun Microsystems v Amtec Computer [2006] EWHC 62 (Ch) at [21]-[25], Honda Motor v Neesam [2006] EWHC 1051 at [5], Adidas v. Microhaven [2003] EWHC 840, [2003] ETMR 94 and Levi Strauss v. Tesco [2002] EWHC 1556, [2002] ETMR 95. In no case has implied consent been established.
  32. I do not think these cases advance the argument one whit. They are decisions that the facts in those cases (which differ markedly from those here) did not establish that consent must be inferred. The plain fact is that in Davidoff the ECJ rejected the French Government's submission that consent must always be express and has said there may be cases where one can conclude from the facts that consent was given. The real question is whether that is made out on the facts and circumstances of this case.
  33. Before turning to these, however, I should mention an argument of law advanced by Mr Hobbs. It was to this effect: that it is sufficient if consent is given not by the actual owner of the trade mark right (in this case HSA) but by a party which is "legally or economically linked" to it. So, for example, if consent were given by one of a group of linked companies, that would do even if another member of the group were the actual right holder. His submission was founded on Keurkoop v Nancy Kean [1982] ECR 2853, [25] and CNL-Sucal v Hag ("HAG 2"), [1990] ECR I-3711, [12], Pytheron v Jean Bourdon [1997] ECR I-1729 [21] and most particularly IHT v Ideal-Standard [1994] ECR I-2789.
  34. To explain the point in more detail it is necessary to summarise a little history. As I have outlined above, it was the Court which developed the "exhaustion" principle on the basis of Arts 30-36 of the Treaty during the 1970s and early 80s. As part of that development it ruled in van Zuylen v HAG [1974] ECR 731 that the free circulation rule applied where two unconnected parties put goods on the common market under the same trade mark if their right to the mark had a "common origin". In the case concerned, the ownership of the trade mark HAG in Benelux and Germany, once in the hands of a single enterprise, had become split as between two owners in different member states as a result of a confiscation of the Benelux mark during the war.
  35. The "common origin" doctrine was actually an affront to common sense – it meant that there would be two different HAG brands on the market with quite different trade mark owners. The only link was the historical accident of a severance. The doctrine had no real foundation in the treaty and was much criticised. In due course, in Hag II, the Court recanted, limiting the free circulation rule to:
  36. [12] … a product which has been lawfully marketed in another Member State by the owner of the right himself, with his consent, or by a person economically or legally dependent on him.
  37. Following HAG II, Ideal Standard, another split mark case, reached the court. But this time the split had happened voluntarily. The German and French Ideal Standard trade marks were in wholly different hands as a result of the assignment of the French registration (I summarise). Could the German trade mark be asserted against French Ideal Standard goods imported into Germany? The Court said yes. It said:
  38. [34] So, application of a national law which would give the trade-mark owner in the importing State the right to oppose the marketing of products which have been put into circulation in the exporting State by him or with his consent is precluded as contrary to Articles 30 and 36. This principle, known as the exhaustion of rights, applies where the owner of the trade mark in the importing State and the owner of the trade mark in the exporting State are the same or where, even if they are separate persons, they are economically linked. A number of situations are covered: products put into circulation by the same undertaking, by a licensee, by a parent company, by a subsidiary of the same group, or by an exclusive distributor.
    [37] In the situations described above (paragraph 34) the function of the trade mark is in no way called in question by freedom to import. As was held in HAG II:
    For the trade mark to be able to fulfil [its] role, it must offer a guarantee that all goods bearing it have been produced under the control of a single undertaking which is accountable for their quality (paragraph 13).
    In all the cases mentioned, control was in the hands of a single body: the group of companies in the case of products put into circulation by a subsidiary; the manufacturer in the case of products marketed by the distributor; the licensor in the case of products marketed by a licensee. In the case of a licence, the licensor can control the quality of the licensee's products by including in the contract clauses requiring the licensee to comply with his instructions and giving him the possibility of verifying such compliance. The origin which the trade mark is intended to guarantee is the same: it is not defined by reference to the manufacturer but by reference to the point of control of manufacture.
    [38] It must further be stressed that the decisive factor is the possibility of control over the quality of goods, not the actual exercise of that control. Accordingly a national law allowing the licensor to oppose importation of the licensee's products on grounds of poor quality would be precluded as contrary to Articles 30 and 36: if the licensor tolerates the manufacture of poor quality products, despite having contractual means of preventing it, he must bear the responsibility. Similarly if the manufacture of products is decentralised within a group of companies and the subsidiaries in each of the Member States manufacture products whose quality is geared to the particularities of each national market, a national law which enabled one subsidiary of the group to oppose the marketing in the territory of that State of products manufactured by an affiliated company on grounds of those quality differences would also be precluded. Articles 30 and 36 require the group to bear the consequences of its choice.
  39. Basing himself particularly on this last paragraph, Mr Hobbs submitted that a trade mark owner will be taken to have given consent to EU-wide marketing if, having control over the quality of goods, he refrains from controlling what quality is achieved by a licensee or he allows marketing by a group connected company. In the course of argument two legal theories for this were discussed: the concept of agency law that a man is bound by the acts of his agent if he has clothed him with apparent authority to do the act concerned (what English lawyers call "ostensible authority") and that of vicarious liability – the legal technique for making A liable for a wrong committed by B (typically, for instance, where a company is made liable for a wrong committed by an employee acting in the course of his employment).
  40. Either of these theories would do for Mr Hobbs' purpose, which is contained in a grandiose submission about the structure and nature of the Cuban economy starting with references to the Cuban constitution. I do not think I am oversimplying the argument to summarise it as this: everything in Cuba is controlled by the State. So all the acts of HSA, and of the Casa, must be regarded as legally and economically linked. Hence if a Casa sells to a foreigner in Cuba knowing that he intends to re-sell in the EU consent must be taken to have been given by HSA, whether or not HSA consents or even knows of the transaction or the type of transaction.
  41. I do not accept this argument. It is just too theoretical. The Court of Justice has identified the "point of control" as being what matters. I think one must focus on what is really happening, on actual knowledge and actual, practical control or the right of control by the trade mark owner. In this case this means concentrating on the acts of HSA and its legal and de facto powers of control. Do they, taken overall, lead to the unequivocal conclusion that HSA consented to the sale of the consignments in Europe?
  42. Unequivocal implied consent?

    The overall position
  43. I start with the Judge's overall finding – it forms part of the agreed statement of facts quoted above, but it is worth repeating the essential bits:
  44. [22] … HSA is a major player in the Cuban economy. …. Sr Garrido and Sra Garcia (HSA's former Marketing Director) gave evidence about HSA's central role in the Cuban tobacco industry. It reviews and fixes the price of habanos both for export and for local sale. It determines the brand positioning for habanos, advertising and general sales structure and all aspects of local marketing strategy. It determines all aspects of packaging and trade mark use – and more.

    The facturas
  45. Next there is the evidence about the facturas – the standard form invoice used when someone buys in a Casa. It is referred to in paragraph 9 of the agreed facts. The forms are written, printed by or for, and supplied by HSA to the Casas. They contain spaces for the name, nationality and passport number of the purchaser. They contain the following sentence "Note show this voucher at Custom House on leaving the country." That is written in Spanish, English, French and German. I draw particular attention to German – for apart from the German speaking cantons of Switzerland I cannot think of any country outside the EEA which is German speaking.
  46. Some evidence (but without any disclosure about it or the reasons for it) was given to the effect that the form had recently been changed so as to add the words (in Spanish and English only) "Not for re-sale." However that is not relevant to any of the consignments with which this case is concerned. As it happens there was also evidence that facturas without that rubric continued in use well after they were supposed to have been changed. The explanation – using up old stock - is not particularly convincing, even allowing for the fact that Cuba is a poor country.
  47. It would seem that there is no legal entitlement in HSA to copies of the facturas issued to customers (there are 3, one for retention by the Casa which sells the cigars to the foreigner, and two for the purchaser – he uses one at Customs to allow export when he leaves Cuba and there is one for his own use). Notwithstanding this, the evidence was clear that in practice HSA would be given access to the copies kept by the Casa.
  48. I should say that disclosure of facturas was one of the areas in which HSA's disclosure was inadequate. It submitted to a consent order to disclose:
  49. Documents relating to: (i) the value of purchases from domestic Cuban outlets by overseas visitors to Cuba; and (ii) distribution by the Quinta Avenida Casa insofar as such documents show sales by the Quinta Avenida Casa to customers howsoever identified

    Then no documents were supplied, the reason offered by a letter from HSA's solicitors, Mishcon de Reya, being:

    We are instructed that there are no documents falling within paragraph 1(a) of the Order
  50. That answer cannot have been literally true. Mr Arnold submitted in the surrounding context what was really meant was that there are no documents of that description within the custody power or control of HSA. But Sr. Garrido of HSA acknowledged that if HSA had asked for the documents they could have been obtained. It is not acceptable for a party to submit to an order for specific disclosure and then to answer that by saying there are no documents if its true position is that it formally has not got documents of the class concerned, but can readily obtain them. A fair approach to litigation requires that to be spelt out properly – the appropriate order may then be to "use best endeavours" to supply the documents.
  51. Actual Control over Casa staff
  52. The evidence about the continued use of the "old" factura included some about the subsequent disciplining of a Mr Aleman to whom Mr Craggs of the defendants said he had spoken. On its own evidence, HSA was in a position to see that disciplinary measures were taken against an employee of a Casa, thus demonstrating at the very least de facto control of what is going on in these outlets.
  53. We are not in a position to resolve the position about Mr Aleman's evidence further. Mr Hobbs submits that Mr Aleman and three other Casa employees who had given witness statements for the defendants were put under improper pressure to retract their evidence. What we can and do note is that HSA was in position to interview these witnesses almost immediately after learning of their statements – again an indication of de facto control.
  54. The monthly meetings
  55. Although HSA's disclosure was in the words of the Judge "not good" it did, pursuant to a consent order made following an application for specific disclosure, disclose some minutes of meetings in 2003/4 between individuals from itself, the Casas, Customs and sometimes the relevant Ministry. The Judge hardly referred to them, saying they were not "of significance". I think he was in error here. I set forth some relevant passages from the minutes, adding an identification of the individual concerned and his/her function.
  56. Meeting of 16/12/03
    Victor [Aguila – HSA Manager domestic market]
    Prices rose by 5% this month [and] many customers complained to our Management. Everyone was surprised/taken aback by this as this is a month when discounts are usually offered. However, this is something which we [will] have to face: the analysts who reached the conclusion about/[of the need for] a price rise did so with the aim of ensuring that Cuba's earnings would increase.
    Caridad [Marquetti – Manager of Cubalse operator of a major Casa, Quinta Avenida]
    Last year, the prices of many bands (a reference to the band on the cigar) which were cheaper in Spain than in Cuba, were lowered. The Ministry of Tourism called on the Chains to submit a proposal as to how prices could be lowered, after which Habanos increased prices for all markets, including Spain.
    Marcelino [Ben - HSA Manager domestic market]:
    On the subject of price increases we should proceed with caution – not all bands are able to withstand the same level of increase.
    Osmany [Rios - Area manager for Cubalse, operator of Quinta Avenida]:
    On the subject of prices, the most important thing is to fix them. There could be [some] Chains selling at the new price and others at the old price because the Resolution has [still] not been issued.
    Resolution (of meeting) passed: To go to the Ministry of Finance to seek the Resolution and [then] fax it to all the Chains so that this problem can be resolved this week.
    Julio [Pιrez – HSA – from "DTI" its "anti-counterfeiting brigade" as the Judge called it]:
    The Chains need to keep tight control over/a tight check on invoices. Seals are being sold but there is not much demand. Our comrades in Border Customs are seizing counterfeit cigars. The "detection of offences" = the number of offences detected from 8th October to date has increased.
    Victor ...HSA): This is a campaign which must be continued: we are up against a criminal element which has seen the sale of cigars as a means of making money.
    Julio (HSA – DTI):
    Everything has been done with the idea of making it difficult to sell cigars illegally but at the same time the overseas market can determine who is buying in Cuba and create some competition.
    Victor (HSA): This whole campaign in which we are engaged needs to be promoted, so that everyone gets to know about it.
    Cιsar [Barrameda - Casas De Habano]:
    We have approached Beatriz to promote it on the Habanos website.
    Customs: Sometimes the traveller does not reach the shop. The important thing is for the leaflet issued to all travellers upon arrival in Cuba to be as clear as possible so that the traveller is not confused when he/she goes to make a purchase.
    Marcelino (HSA): It is absolutely prohibited to give away a box to a customer in the shops: the cigars purchased by the customer must be issued in officially approved boxes.

    Meeting of 11th February 2004

    Josι Andrιs [Plas – of Cubanacαn]:
    …Tourism is booming [and] Cuba is in need of our sales, so we need to sell and for that you have to distribute cigars to allow us to do what we have to do. We cannot remain closed for so many days for stock taking at the height of the tourist season. This type of stock taking is what we do in April which is when the low season begins.
    Marcelino (HSA): Years ago, the argument put forward for this measure to be taken was that with the low prices buyers would gain/be at an advantage here and they [those who put forward the argument] won the day for setting up a parallel market. This was a justified, widespread complaint among all distributors.

    Meeting of 21st April 2004

    Moya (Senior Customs): We have a situation where a Cuban tried to take out a large quantity of cigars using DHL; my worry is, is there no limit on sales to a national?
    Marcelino (HSA): There is no limit whatsoever; a customer, whether Cuban or foreign, may buy up to the figure displayed in the shop.
    Moya (Customs) ...a correction of the minutes for Marcelino). Irrespective of the fact that sales to nationals are not regulated, behind it there is always some illegality. We are reviewing the loophole left in Resolution 41. No more than one crate per month can be exported via DHL. A meeting will need to be held with DHL to look into this matter.

    Meeting of 14th July 2004

    Marcelino (HSA): When prices were lowered in 2002, the shops complained that in European countries – in Spain – cigars were cheaper than in Cuba. So then it was proposed that prices should be lowered. At the rate of exchange between the dollar and the euro, prices were between 45% and 60%.
    Marcelino (HSA): If we have evidence to show that this price increase is proving prejudicial rather than beneficial to us, in the case of [?] the chains [?] we should raise it [?]/take it up with [?] the MFP and the MINCIN. Moreover, the increase should not be linear since not all the bands have the same turnover.
    Mons (Casa del Habano): 80% of the cigars is sold to Caribbean and US tourists, it is not for Europe. The economic situation, as I see it, is that the price should not have been raised: sales are half of what was being sold, we are failing to sell between 600 and 700 thousand dollars – what we are failing to sell today we will not recuperate tomorrow.
    Marcelino (HSA): It is true that we sell a lot of cigars to tourists from Mexico, Panama and Costa Rica, but if we are able to demonstrate numerically that this increase is proving prejudicial to us they will understand since the country does benefit from the influx of money [currency?].
  57. I think the minutes show that:
  58. i) The parties were all acting in concert concerning every aspect of the domestic market, including sales to foreigners who would be taking the goods out of the country.

    ii) There was a common concern that the domestic market should be a source of hard currency – which means substantial sales from the Casas.

    iii) It was known that there was a relationship between the domestic market sales and sales made abroad – the clear implication is that it was known that domestic sales would affect the market abroad.

    iv) HSA were calling on the "chains" to control invoices – consistent with what I have said earlier about control over these. Of course control over invoices would be important for anti-counterfeiting but it is potentially equally important where "grey" goods (i.e. those going for parallel import) are concerned.

    v) Sometimes unlimited quantities were sold by the shops.

  59. Mr Arnold submitted that the minutes showed no more than that wholly independent parties were discussing matters of common concern, e.g. anti-counterfeiting measures, problems about late payment, and (as is apparently lawful in Cuba) price fixing. I agree that they show these things too, but to my mind the overall impression is clearly that HSA had much more control than that.
  60. The US$25,000 limit
  61. It is HSA who set this limit (see para. 15 of the agreed facts). It applies to 7 Casas only (others have much lower limits). They are those who sell principally to foreigners. The Judge held that that value of cigars (which could amount to several thousand, depending on price) was a commercial quantity. A purchaser would obviously be intending to purchase for re-sale. Mr Arnold floated the idea that a single consumer might want to smoke such a quantity – possible, but scarcely realistic and certainly not so for most purchases of this amount. The Judge rejected "fanciful justifications" from HSA witnesses for this amount [119]. Moreover, Sr. Garrida specifically gave evidence as to the limit being imposed by HSA "to protect our exclusive distributors". The only reasonable influence is that it knew and expected these small quantities to reach the markets of its distributors.HHHHH=
  62. Mr Hobbs was anxious, unnecessarily so in my view, to argue that the limit was in any event not observed or was pointless in that the same man might go back time and time again for more, or might have a friend purchase or might go to several different Casas, purchasing up to the limit at each. Certainly there was some evidence of non-or inconsistent observance. But to my mind none of this matters. The key factor is the limit itself – well above purely personal consumption.
  63. The 2% royalty on sales by Casas
  64. HSA have a direct interest in sales by the Casas – it has a 2% royalty from them in addition to the price at which the cigars are supplied. The royalty is for the use of the trade mark La Casa del Habano rather than the trade marks in suit, but that makes no difference from the point of view of having an incentive to give consent to sales by the Casas.
  65. Provisional Conclusion as to consent

  66. It seems to me blindingly obvious that HSA are saying in effect to the Casas "you can sell these small but commercial quantities to foreigners and if you do you must give them the appropriate documentation so they can go through Customs so they can take them home to sell." And that conclusion leads ineluctably to the conclusion that consent to the use of the trade marks on the purchaser's home market is given. The "unequivocal" test is passed. Despite having exclusive distributors outside Cuba, HSA were prepared not only to tolerate but to allow small commercial quantities to be purchased by foreigners within Cuba for them to take out and re-sell abroad.
  67. Moreover there is ample confirmation that this is exactly what HSA wanted – the royalty, the desire for hard currency, and the pricing in Cuba having regard not only to home market conditions but prices in export markets all confirm this.
  68. I think that this conclusion applies as much to purchases by Europeans for sale within Europe as it does elsewhere. I say that for two reasons. First the nationality of the purchaser is known (the factura requires this) and no distinction is made between Europeans and others. Second there is the use of German on the factura. The author must have expected and intended that a German purchaser will buy and take home for resale.
  69. Yet further confirmation as to consent for Europe, and indeed specifically as regards the defendants, flows from the evidence about the faxes from the defendants. Mr Kenyon sent a series of orders by fax from the UK to Sr Osmany Rios Moreno at Casa del Habanos. The orders were for small but commercial quantities. They were sent on behalf of Master Cigars. Several indicated that "Peter [Craggs] will pass by the shop to arrange payment and organize with you delivery of the stock to Havana Airport Cargo." The actual consignments followed these faxes, though not in those quantities. Although no disclosure was given of these documents by HSA, it is not suggested that these faxes were not received. The remarkable thing, if permission for resale by Master Cigars was not being given by clear unequivocal implication, is that there was no reply to the effect "you cannot buy these for resale in the UK."
  70. It was suggested that Sr Moreno was acting without authority in relation to these transactions. But this is not credible: he was senior enough to be one of those who attended the monthly meetings. Of course if there had been disclosure showing that faxes of this sort from foreign purchasers were rare or even unique to Master Cigars that might have supported a lack of authority allegation. As I have recorded no disclosure was given. So, as the evidence stands, I see no reason to suppose that orders from abroad of this sort were not entirely routine – after all the whole point of the seven Casas which had the $25,000 limit was to sell to foreigners who were almost certainly going to take away for export.
  71. I reach my provisional conclusion without finding it necessary to go into Mr Hobbs' further submission that HSA's failure to give proper disclosure should lead to inferences being drawn against them. Disclosure of documents about how the $25,000 was decided upon, or of how many orders from abroad are received by the Casas, or the frequency of purchases at the $25,000 limit or of any discussions about the "grey" market (and there surely must have been) were clearly relevant. But in the end, even without that disclosure, one reaches the position that HSA, by its conduct, is shown to have consented unequivocally to the trickle of small but commercial consignments going on the market in Europe by way of local purchase in Cuba for export. The acts taken together are consistent only with such consent.
  72. The contrary arguments as to consent

  73. Mr Arnold raised a number of these. First he submitted that whatever the general position, these Defendants knew that HSA objected. He pointed to the Judge's findings:
  74. [87] It is also clear on the evidence that by the date of the Consignment at least, Mr Kenyon knew that serious objection was being taken by HSA to his activities as an importer of habanos into the UK.
    [122] Some time before the purchase of the Consignment, both Mr Kenyon and Mr Craggs had been made well aware of HSA's hostility to their attempts to use the trade marks for the purpose of importing habanos into the UK: D8/872 and 875-876.
    [123] Furthermore, as a relatively minor matter under the issue of consent, I have noted the evidence relating to the High Court action taken in November 2003 against Mr Kenyon's friend Mr Casdagli who was the defendant in another 'parallel imports' case brought by HSA and H&F in respect of cigars imported into the UK from Central America: see X 13. Mr Casdagli gave evidence and seemed a fair witness. He said that Mr Kenyon was told of all the material facts relating to that case: D7/695-696.
  75. There are several points about this. First there does not appear to be any evidence upon which the Judge could have made that finding. There was cross-examination about a letter of 13th January 2005 from HSA to Mr Kenyon following an inquiry from him about whether there was a possibility of the supply of counterfeits to one of the Casas who had supplied him. That is obviously too late for any of the consignments, including the last.
  76. There was also cross-examination about a request from Mr Kenyon to HSA in 2002 to open a Casa del Habano here. It was refused. But what is not shown is that any objection was raised to Mr Kenyon (either himself or via his company) purchasing or having purchased for him small commercial quantities in Cuba in accordance with the established procedure there (facturas, the limit and so on). And he (his evidence was accepted as truthful) gave evidence to the effect that he thought that that course of purchasing was considered in order:
  77. Now, the changes that took place in Habanos SA when they became in theory a joint venture company and the Spanish purchased for over $500 million 50% of the company, the Cubans in order to develop an alternative sales avenue set up the Casa del Habano division where they were able to develop through retail outlets other sales which would take place without having to share the benefits of that with the Spanish. Now, it was those opportunities and the changes that took place in Habanos SA which led to us having the ability to be able to go and do the sort of things that we were doing and which was given their direct encouragement by way that we have all been describing and which the paperwork supports. It is on that basis that we believe quite clearly, and legal advice we have taken on its supports this, that the paperwork that is in place is there in order to appear not to tread on the toes of the distributor network which is shared with the Spanish. But the purchasing that takes place, in particular in the Cubans much needed foreign currency. It is on that basis that we commenced our purchasing directly through Quinta Avenida and for which we have obtained discounts and were developing a good commercial relationship until we had these problems back in the UK where the local distributor took it on themselves to claim counterfeit.
  78. Then there is the matter referred to in [123]. This is about an objection raised by HSA concerning importation and sale of cigars from Central America. It does not establish any objection to the type of local purchase and export involved here. And actually Mr Casdagli's witness statement shows that prior to his becoming involved in these transaction, from 1997-2002 he did buy in Cuba in much the same way as the present defendants and without objection.
  79. So Mr Arnold's first point, specific knowledge of objection, falls away so far as the consignments with which this case is concerned. Whether, now Mr Kenyon has knowledge of HSA's stated objection to purchase in Cuba and subsequent export and re-sale (especially if the new facturas are in use) it could still be said there is consent I do not decide. A lot would depend on whether it were the case that in reality the objection and new factura were really a faηade – no more than empty protestations about what was really encouraged. The keeping of a limit of a single purchase as high as $25,000 or its equivalent would perhaps be a pointer to this but I make no finding one way or another.
  80. Next, having taken us to some of the post-Davidoff authorities (which, as I have said, I do not think assist), Mr Arnold sought to draw analogies between the facts of Davidoff (and Levi, heard with Davidoff) and the present. First there were the Davidoff parallel imports. The goods were simply purchased in Singapore from Davidoff's exclusive distributor there. That seems to me miles away from the present case. There is no question of Davidoff acting in concert with its distributor, of imposing a limit, of dictating what is on the receipt, of copies of the receipt being especially designed to facilitate export.
  81. Next Mr Arnold drew attention to the facts in the case of Levi jeans. They were purchased by the UK importers either directly from authorised retailers abroad (e.g. Mexico) or from people called "accumulators". He particularly relied upon the latter. A limit of 6 pairs of jeans for any one purchase had been set. Accumulators would buy lots of jeans in different transactions and then sell them to the UK importers. Mr Arnold suggested the 6 pair limit was the same as the $25,000 limit in this case. But it is not for a variety of reasons. Just 6 pairs of jeans is not a small but commercial quantity – true it is rather more than one might normally expect for one's own personal use (though one can easily imagine a girl buying 3 for herself and 3 for her brother), but it is certainly not on its own a commercial quantity. Moreover there was no question of facilitation for export involved, as there is here. Nor was there any detailed co-operation between the trade mark owner and the outlet. In short, the acts relied upon to imply consent were not consistent only with consent having been given. By contrast they are here.
  82. Perhaps Mr Arnold's best point was his submission about the $25,000 limit. He said suppose one accepts that it is imposed to limit parallel trade. That is not good enough – it does not unequivocally point to consent to that trade. The trouble with the submission is that it ignores the other factors such the facturas to assist export and the monthly meetings and so on. It is the factors taken as a whole which unequivocally indicate consent.
  83. The Judge thought that turning a blind eye to parallel trade was not enough to imply consent [119]. That may indeed follow from Davidoff if one means simply that the trade mark owner has knowledge that parallel trade goes on and yet does nothing to stop it. Failure to police is not enough, according to Davidoff. But that is not this case – the trade mark owner has done more: he has facilitated the parallel trade in addition to failing to police. Moreover even in relation to failure to police, we have the circumstance that a system was set up via the facturas which could be used to police and yet there is an abstention from using it for that purpose That suggests a positive decision to condone (i.e. consent to) the parallel trade.
  84. Mr Arnold also sought to rely on some Customs documents. There was a form of receipt from the Customs given to Mr Craggs which said: "operacion no commercial". I do not see where that gets him. The quantities were plainly so large as to be commercial – and what the Customs chose to call them has nothing directly to do with whether HSA did acts unequivocally indicating consent. There was also a form filled in by Customs saying the goods had no declared value for Customs which was signed by Mr Craggs. Again this amounts to nothing. For obviously the amount of cigars did have a value. Neither kind of document vitiates the consent to be implied by HSA's conduct.
  85. Finally Mr Arnold had a point raised by way of a respondents' notice about the requirements for doing business in Cuba. He suggested that if the defendants were conducting a Cuban business their activities would be illegal by Cuban law. It is not necessary go into this in detail. Mr Hobbs took us to the cross-examination of Sr. Garrido about the relevant provisions of Cuban law. It is clear that it is not directed at anyone who merely travels to Cuba to purchase goods in Cuba for export. It is a law about setting up business in Cuba, investing in Cuba.
  86. Conclusion

  87. So I think that none of Mr Arnold's points rebut my provisional conclusion which therefore turns into my final conclusion. I am conscious that this court should only reverse a trial judge when it is satisfied that his decision was "wrong" (CPR 52.11(3)) but I am so satisfied. I think the judge erred in principle in at least two ways, first as to his holding that the defendants knew of any objection to local purchase for export to Europe and second in failing to consider the impact of the evidence as a whole, and particularly the combined effect of the facturas and the limit.
  88. In the result I would allow this appeal. None of the consignments concerned involved infringement of trade mark.
  89. I would add a postscript: it does not follow that the defendants can repeat their purchases and importations. Whether they can or not will depend on the detailed circumstances as regards each consignment.
  90. Lord Justice Lloyd:

  91. I agree.
  92. Lord Justice Chadwick:

  93. I also agree.

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